The Congressional Budget Office, CBO, is out with their projections for debt, deficit, spending, and revenue levels out to 2050 – and it ain’t a pretty picture. Even accounting for the effects for COVID-19 and the government response thereof, deficits are expected to increase to 5 percent of GDP by 2030 and to a whopping 13 percent by 2050. For context, the average deficit as a percentage of GDP has been 3 percent for the past 50 years. Following suit, the federal debt will increase to a record size of the economy when it hits 107 percent of GDP in 2023. This trend, unfortunately continues and hits a striking 195 percent of GDP by 2050. The CBO even remarks about the fragility of the economy and it will likely not be able to tolerate higher interest rates. Also noting that inflation may be on its way depending on how the government decides to “finance” the debt. And lastly, warning of a potential fiscal crisis and/or decline in the value of Treasury securities. All of the above points have been discussed at length by The Kapital News – most of which on a near daily basis. This is nothing short of a government that is out of control. And sadly, neither the President, nor VP Biden, are likely to comment on this fiscal disaster, nor address the structural issues that have led us to this destination, nor have a realistic plan to address it. The lack of honesty and leadership is a tragedy in and of itself.
In other news, the US dollar index is rallying, putting downward pressure on precious metals, some commodities, and likely stock prices as well. Is this a rush to “safety” in the US dollar? Or is liquidity starting to dry up once again, thus causing an increase in demand for US dollars in response to all of the US dollar denominated debt(s) that are outstanding and due? This is something worth monitoring. Interesting to note, however, is that the 10-year Treasury has barely moved and has been range-bound for quite awhile. Perhaps this fact throws water on the safe-haven play, as one would also expect to see falling yields in such a scenario. Today, Federal Reserve Chairman Jay Powell and Treasury Secretary Mnuchin, gave testimony on the state of the economy and the various efforts undertaken to revive the economy. Long-story short, they are requesting more spending and cannot figure out how to get money in the hands of small businesses, but have no problem giving it to major banks and large corporations – American or otherwise. And lastly, with rising COVID-19 cases in Europe, UK Prime Minister, Boris Johnson, made a public announcement urging Brits to social distancing and utilize other measures to get the numbers down, and should numbers continue to increase, then lock-down 2.0 is the likely outcome. Other countries may follow suit. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Debt #Deficits #Recession #Depression #Inflation #USA #BananaRepublic #EndTheFed #Liberty #Revolution #Gold #Silver
Just yesterday we asked if the risk-reward breakdown was signaling danger ahead? Well as timing would have it, there was a large market pullback today across the major indexes. The question moving forward of course is, is there more downside to come, or is this just a much needed “breather” in a very overbought and overextended rally, whereby the next leg up is to be realized? Well, as we know, anything is possible when you have policymakers around the world doing their best to keep asset prices elevated. Unfortunately, these governments and central banks are doing so at any cost. And these costs are going to be truly devastating to the masses. These costs will show up, and many of them are already here, with some of the most destructive being that of inflation and hyperinflation.
Further today during our discussion was the initial jobless claims number which came in at 881,000 for the week ending 29 August. For the entire month of August, initial claims totaled over 5.1 million Americans. When we take into consideration all of the unemployment benefits being paid out, over 29.2 million Americans are receiving some form of benefit. This is for the week ending 15 August, so there is a lag involved, but what is most startling, is that the week-over-week change was an additional 2.195 million Americans claiming benefits. This is clearly in the wrong direction, but consistent with our analysis of the many distortionary effects that exist within the system due to various policy programs from the government and the Federal Reserve. A fuller and more accurate picture of the jobs market will be made known once the moratoriums and other policies are lifted and/or exhausted. Tomorrow, the August jobs report will be released. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Jobs #Inflation #Gold #Bailouts #Unemployment #BananaRepublic #EndTheFed #Silver #Recession #Depression #USA #Protests #Liberty #Revolution
This week is surely setting up to be one for the front pages. There will undoubtedly be further remarks and tweets from President Trump regarding an interim “Phase 1” trade deal with China. Short on specifics and reminiscent of this summer’s trade truce, we here at The Kapital News are highly skeptical of any deal of worth. Even if there is substance, this would simply take us back to where we were prior to the trade war in regards to the amount of agricultural products being purchased by the Chinese. Nevertheless, The White House will continue its jawboning and market manipulation tactics. Other market rallying headlines were the rumors of a Brexit deal in the works only to have conflicting stories come out this weekend claiming that there is still much work to do. The Queen’s Speech is also set to take place on Monday and if Parliament shoots down the vote on the Queen’s Speech then there is going to be much pressure on PM Boris Johnson to resign. This would only serve to throw another curveball in the Brexit saga. The Federal Reserve has started another round of QE. Welcome to QE4, but don’t you dare call it that – at least the Fed doesn’t want you calling it QE. Why? Because the Fed also claims that the US economy is strong and is in a good place, so then why would they need to engage in an emergency monetary policy? A rose by any other name is still as beautiful. #EndTheFed The Fed is also expanding their involvement in the overnight repo market. Recall it was initially just a one-off, then extended to 10 October, then extended to 4 November, now it’s going to last until at least January of 2020 (and it’s not likely going to be enough). There is also continuing escalation between Syria and the Turks. It is likely that if the Turkish military continues deeper into Syria that Syria will declare war against Turkey. Also, since President Trump has ordered the removal of US forces from Syria, the Kurds have now formed an alliance with the Syrian government in order to fight-off the Turkish military. This story has drawn the ire of Republicans and Democrats alike and are pressuring the President to hit Turkey with harsh sanctions to crumble their economy. It is unknown at this time as to what sanctions if any the White House will impose. President Trump is calling an end to these endless wars by withdrawing US forces from Syria, only to deploy thousands more to Saudi Arabia and surrounding countries to fend off Iranian aggression. Does this make any sense? Stay diversified, stay vigilant, and stay with The Kapital News. #Brexit #War #Peace #Economy #TradeWar #Politics #Impeachment #Whistleblower #Justice #Truth #Recession #Stocks
Today we examine our volatility model. It is simplistic in nature and by design, but nevertheless, it has proven accurate. If history is any indicator as to what we are likely to witness over the remainder of 2019, it’s that volatility is on its way. This is especially true for the DOW and the S&P 500 and to a lesser extent for the Nasdaq and the Russell 2000. However, nothing is written in stone and while volatility tends to coincide with moves to the downside, given the fact that central banks the world over are priming their printing presses and some central governments are looking to deploy fiscal stimulus measures, the melt-up scenario is still possible. The Kapital News, however, at this juncture continues to put more weight on the downside risks given the overall economic environment. Stay vigilant and have a plan.
